Drowning in money.

The Finance Ministry's Monthly Economic Review for September 2026 "said the domestic economy continues to show resilience in a challenging global environment." "A strong El Nino could hurt the rabi crop through heat stress and lower soil moisture," and "Elevated crude prices could add to inflation particularly after the US Federal Reserve's 25 basis points rate hikes in September." ET. "Overall food inflation rose to 5.95% in August from 5.52% in July, while headline consumer inflation climbed to 4.82% from 4.45%." "Costlier onions, higher cooking oil prices, a jump in the cost of pulses, and the same shopping list can start becoming noticeably more expensive over time." ET. "The monsoon has failed. Rainfall was 12.6% below normal. In earlier decades, this would have spelt economic calamity and political earthquake." "In 1965, an 18.6% rainfall deficit caused a 3.7% GDP contraction." But in 2009, the GDP grew 8.5% despite a 21.8% rainfall deficit. The monsoon failed in 2014 and 2015 but the "economy soared 7.2% and 8.0% respectively," wrote Swaminathan Aiyar. However, "Despite claims that India's economy has become drought-proof, weak rains remain a key worry." "Inadequate rainfall reduces summer crop yields and leaves inadequate soil moisture for winter sowing." Higher fertilizer prices and lower harvests raise food prices and "Rural purchasing power weakens precisely when households must spend more on essentials. This combination transmits distress beyond agriculture to consumer goods, construction and small businesses. Imports can relieve supply shortages but worsen external finances," wrote Ajit Ranade. The US Federal Reserve raised interest rate by 25 basis points (bps) last month and could hike it once more this year. "The European Central Bank and Bank of Japan have raised rates too." Higher US rate "triggers capital outflows from other markets into the US." This weakens local currencies and leads to imported inflation." Mint. The Reserve Bank of India opened a dollar/rupee swap window for Foreign Currency Non-Resident (FCNR) (B) deposits for banks from June to 31 August. The RBI undertook to sell the dollars back at the buying rate during redemption of the bonds, thus picking up the full cost of hedging any depreciation of the rupee against the dollar. India Macroeconomic Indices. At the end of the window FCNR (B) deposits raised $127.23 billion, while "Overseas Foreign-Currency Borrowings (OFCB) brought in $5.260 billion, and External Commercial Borrowings (ECB) contributed $3.891 billion," for a total of $136.4 billion. DC. As the RBI swapped the dollars for rupees, "Surplus liquidity in India's money market has crossed Rs 11 trillion, leaving RBI to mop up an unusually large pool of cash unleashed by banks' $136 billion mobilisation of foreign currency deposit." CFO. The yield on 10-year government bonds is at 7.247% this morning. in.investing.com. "The 10-year India government bond (IGB) has hardened by around 50 basis points (bps) since the beginning of March, to about 7.20%." And, "it is interesting to see that the rupee is back under depreciation pressure," which "has also confused market participants about why $140 billion will not alleviate pressure." It is because, "The $200 billion forward book is being kept afloat through sell-buy swaps to roll over the dollar liability and maintain 'optimum' reserve levels." This means actual reserves are closer to $550 billion. "The question that begs the central bank is whether a 50 bps rate hike is enough? Will a 100 bps cash reserve ratio be adequate in permanently absorbing the troubling sticky and inflationary excess liquidity created by the FCNR scheme's much celebrated dollar inflows? asked Ajay Marwaha. Cash reserve ratio (CRR) is a portion of deposits collected by banks that must be deposited at the RBI without any interest. Investopedia. This is to reduce money supply. Poor monsoon rains, but it's raining money on the market. Will the RBI drown? And take us with it?